Key Considerations for Drafting Your SR&ED Claim – Highlighters & Pitfalls
Source: Notion | Last edited: 2025-03-25 | ID: 1ba2d2dc-3ef...
The following markdown formatted guideline includes the additional guidance from Lulu Guo (EY):
# Key Considerations for Drafting Your SR&ED Claim – Highlighters & Pitfalls
## Core Documentation Requirements
### Technological Uncertainty & Advancement
- What major challenges did you encounter in fiscal 2024? (e.g., accuracy, performance, scalability, data integrity, synchronization, security/privacy, memory limitations, computing resources constraints)- What publicly available resources, standard practices, or known technologies existed for these problems and why were they unable to resolve your challenges?- What were your technical requirements and why couldn't they be met using standard practices or industry knowledge?- How did your approach push beyond conventional industry solutions? What made it novel?- Why was custom development necessary rather than using existing technologies?
### Systematic Investigation & Experimental Development
- What hypotheses did you test and what methods did you use to evaluate success?- What approaches and iterative experimentations (prototypes, processes, architectures) beyond standard practice did you attempt to resolve your challenges?- For the 1st iteration, provide specific technical details of what you developed, risks associated with your approach, and the results (e.g., improved performance by X%, caused more problems, completely resolved the problem)- What were your 2nd, 3rd, 4th, etc. iterations? How did they evolve from previous attempts?- What metrics did you use to measure improvements between iterations?- How did you test in controlled environments and what risks were associated with your approaches?
## Pitfalls to Avoid
⚠ **Vague Descriptions:** Ensure explanations are specific—describe actual problems faced and why existing methods were insufficient.
⚠ **Lack of Documentation:** Keep records of experiments, test results, and performance comparisons.
⚠ **Unclear Novelty:** Clearly state how your work differs from known solutions and why it was necessary to develop in-house.
⚠ **Skipping Failures:** Include examples of failed approaches that led to refinements—this demonstrates a true R&D process.
⚠ **Missing Technical Requirements:** Fail to articulate the specific technical requirements that couldn't be met using standard practices or available technologies.
⚠ **Inadequate Iteration Details:** Not providing sufficient technical details about each experimental iteration and how they built upon each other.
## Chronological Time Tracking – SR&ED Work in 2024
When drafting claims, it's important to **categorize work by quarter** to ensure SR&ED activities are correctly documented. Here's a recommended breakdown:
- **Q1 (Jan - Mar 2024):** Initial hypothesis formulation and experimental setup for new features.- **Q2 (Apr - Jun 2024):** Implementation, early-stage backtesting, and refinement cycles.- **Q3 (Jul - Sep 2024):** Validation, measuring performance against benchmarks, and identifying deployment challenges.- **Q4 (Oct - Dec 2024):** Live testing, real-market adjustments, final iterations, and documentation for SR&ED submission.@Terry Li will handle the calculation of hours below based on percentage feedback from each individual employee:
# SR&ED Salaries/Wages and Hours Information Requirements
**Employee Information Required:**
- Specified Employee Name (Own >10% of company)- Title- Total Fiscal Salary including Taxable Benefits but NOT INCLUDING Bonuses- Value of Taxable Benefits included in Total Salary- Total Hrs. Worked- Project 1 SRED Hours- Project 2 SRED Hours- Project 3 SRED Hours- Project 4 SRED Hours- Province of Employment
**Additional Requirements:**
- Identify which employees are specified (>10% ownership) and non-specified (<10% ownership)- Identify any taxable benefits and/or bonus amounts included in the gross salary- Provide export from General Ledger showing salary/wage expenses were paid during the fiscal year or within 180 days after fiscal year end- Provide total worked hours and hours spent in SR&ED by each employee- If available, provide timesheets that identify time spent in SR&ED
**Hours Calculation Notes:**For British Columbia in 2024, calculation would be:
```text52 weeks * 40hrs / week = 2080 hrsstatutory holidays (BC) = 11 days * 8 hs = 88 hrsstandard vacation (3 weeks) = 15 days * 8 hrs = 120 hrsHrs worked = 2080 - 88 - 120 = 1872 hrsNotes on Specified Employees: Specified Employees are any employee of the company who directly or indirectly owns 10% or more of the company, along with any immediate relatives (spouse, parent, sibling, child). Bonuses should not be included for specified employees.